State Supreme Court holds key to condo assessment case

High court ruling could allow owners to withhold payments if associations fail to maintain building

February 28, 2013|By Matthew Walberg, Chicago Tribune reporter

Lisa Carlson says the water damage to her Highland Park condo led her to stop paying her association fees. (Brian Cassella, Chicago Tribune)

When Lisa Carlson stopped paying her condominium assessments nearly four years ago, she never expected that her legal battle over a leaky roof, bulging drywall and cracked ceilings would wind up before the state Supreme Court.

An appeals court paved the way, ruling that Carlson, of Highland Park, could use her condo board's alleged failure to repair the roof as a defense against its efforts to evict her.

"I stopped paying my assessments because the bottom line is that the board refused to fix the water damage," Carlson said. "To me this has become a cause. This is about more than me."

The case has captured the attention of state and national condo association organizations worried that an Illinois Supreme Court decision in Carlson's favor will make it much more difficult to collect fees from recalcitrant residents.

The implications could be far-reaching, considering the tens of thousands of condo and town home owners in the Chicago area. There are 325,000 community associations in the country, ranging from condominiums to town homes to cooperatives, according to the Community Associations Institute, a trade group based in Falls Church, Va. An estimated 18,000 are in Illinois.

In Cook County, a half-million individual units could be affected, according to the Cook County assessor's office.

"My reaction was, wow, this could be a dangerous precedent," said Frank Rathbun, spokesman for the trade group.

"Now you get into the issue that everybody who thinks that their association isn't fulfilling their obligation can say, 'Well, I'm not going to pay my dues,'" Rathbun said. "That becomes a vicious circle, because the more people don't pay their assessments, the more the association can't do."

The state high court agreed in January to hear the case. It's unknown when it might rule, but the largest community association advocacy group in Illinois isn't waiting to see what happens.

Last week, legislation was filed in Springfield that would override the lower court decision.

"We take it so seriously that (we) worked to help introduce a bill ... so that whatever the courts decide won't affect associations," said Gael Mennecke, executive director of the Chicago-based Association of Condominium and Town Home Associations.

A strained relationship

Carlson's dispute over the water leaks began in August 2007, after a thunderstorm allegedly damaged the roof and outer wall above her fourth-floor unit in the Spanish Court Two Condominiums.

Her top-floor, one-bedroom condo is one of 32 units in the building.

Carlson said she repeatedly tried to persuade the condo board to fix the water problem before she stopped paying her $235 monthly assessment in August 2009.

Three months earlier she listed her unit for sale because her relationship with some condo board members was growing strained, she said.

In February 2010 her condo association filed suit, seeking to evict her until she paid the back assessments.

A Lake County judge barred Carlson from asserting that the association's alleged neglect of the roof was a defense for nonpayment, and in April 2011 she lost a bench trial.

Carlson said she was unable to sell the property because of the water damage and pulled the listing that same year.

She paid her back fees, late fees and a portion of the association's legal fees, she said.

Carlson also appealed to the Illinois 2nd District Appellate Court.

Ruling in her favor in a pair of decisions in last June and November, a three-judge panel noted that it was a precedent-setting case.

Courts across the country have likened community association assessments to property taxes, decreeing that the fees must be paid even if a unit owner believes the board is not fulfilling its duties.

But the appellate court sent Carlson's case back for a new trial, ruling that if an apartment tenant facing eviction for nonpayment of rent can use a landlord's failure to maintain the building as a defense, condo owners should have the same option.

The condo board asked the court to reconsider, complaining that the decision could devastate the ability of associations to collect assessments.

In November, the court denied a rehearing but it modified its original ruling, noting that minor problems like overgrown bushes or sidewalk cracks aren't sufficient to withhold assessments.

A unit owner, the court ruled, must be able to show that a condo board failed to uphold a major requirement of the contract.

The appeals court found that the alleged breach in Carlson's case met that standard.

"A sound roof and exterior walls are perhaps the most fundamental expectations of those who purchase condominium units and expend considerable sums each year for 'maintenance-free' living," the ruling stated.

The judges suggested that Spanish Court Two might have avoided the legal fracas if it had fixed the roof.